The move came hours after Media Square, the holding company, had its shares suspended and was placed into administration after being refused an extension on its bank loan by Lloyds Banking Group.

Lloyds is backing MSQ Partners – Parry and Reid’s buyout vehicle. The new group will be employee-owned, with shares likely to be distributed among the senior management of the 10 former Media Square agencies, including research firm Illuminas, PR agency Smarts, design firm LloydNorthover and ad shop The Gate Worldwide.

In total, the agencies employ more than 650 staff and have annual revenues of approximately £45m, with operations in the UK, US, Hong Kong, China and Singapore.

Reid (pictured) said: “This is an extremely positive development for our staff, clients and suppliers. The deal provides a platform for the group to build on the significant progress made by its agencies at an operating level over the past two years in particular. The debt burden of Media Square was holding back these businesses and as part of the transaction a much more appropriate and sustainable financial structure has been implemented within the group.

“An employee-owned structure where the employees take the majority control and can share in the future success of the business is one that we believe will see our agencies realise their full potential.”

MSQ Partners said that Media Square had “an unsustainable level of debt which dated back to a series of prior acquisitions”, most notably the £63m acquisition in September 2005 of the marketing services agencies that became part of Huntsworth after its merger with Incepta.

Earlier today, Incepta’s former CEO David Wright – now heading up Porta Communications – told the Evening Standard he was looking at whether to make an offer for the Media Square Group.

Wright and Porta were recently sued by Media Square, accused of being part of “unlawful conspiracy” to take control of the group. Both denied the claims.

Media Square’s most recent results, for the six months ending 31 August, showed revenue down 2% to £21.8m and a loss of £1.59m.